1. Background The major goal of the projects in the Developmental Skin Biology Unit is to understand the molecular mechanisms that regulate the stages of epidermal differentiation. Epidermis has been used as an excellent model for studying the process of cellular differentiation because the cells form a stratified structure during development, and each strata is easily identified by morphology and expression of specific markers. Studies by Morasso and collaborators have focused on a homeodomain transcription factor, known as Distal-less 3 (Dlx3). Dlx3, a murine ortholog of the Drosophila Distal-less (Dll) homeodomain protein, is a member of the Dlx vertebrate family. Dlx3 is a transcriptional activator with an AT rich DNA binding site, that is primarily expressed in the differentiated layers of the epidermis and in the hair matrix cells of the hair follicle. Transgenic temporal and spatial mis-expression of Dlx3 in the pre-differentiated basal layer caused an abnormal skin phenotype, characterized by cessation of proliferation and premature differentiation of the basal cells judged by the upregulation of expression of late differentiation markers such as loricrin and filaggrin. The importance of Dlx3 in the patterning and development of ectodermal structures derived from epithelial-mesenchymal interactions during embryogenesis (i.e. tooth, hair) is corroborated by the effects of DLX3 mutations in patients with the autosomal dominant Tricho-Dento-Osseous (TDO) syndrome. 2. Objective of present studies: The objectives are to study the processes that contribute to epidermal cell fate and differentiation by: 1) characterizing the pathway(s) that regulate transcriptional activity during epidermal differentiation; 2) exploring the function, interacting factors and target genes of the homeodomain protein Dlx3 as a crucial transcriptional regulator of terminal differentiation in the skin and 3) identification and characterization of novel genes expressed differentially in the epidermis. 3. Results during the past year To elucidate the functional role of Dlx3, a targeted deletion of the gene was performed and the analysis of the phenotype. Targeted deletion of Dlx3 results in embryonic developmental arrest around day 9.5-10, associated with a gross failure of the placenta to undergo proper morphogenesis. It was not possible to assess the effects of Dlx3 loss of function on epidermal differentiation, since embryonic death occurs significantly earlier than the onset of epidermal stratification (E15.5). We are currently in the process of performing conditional ablation of Dlx3 to be able to specifically assess the role of this homeodomain transcription factor in epidermal stratification. The Dlx3 homeodomain gene is expressed in terminally differentiated murine epidermal cells. As demonstrated for differentiation-specific granular markers, Dlx3 is activated in primary mouse keratinocytes cultured in vitro by increasing the level of the extracellular Ca++. This activation is mediated through a Protein Kinase C-dependent (PKC) pathway. In this study, we investigated whether PKC can modulate the activity of murine Dlx3 protein. Using in vitro kinase assays, we showed that PKC enzymes phosphorylate the Dlx3 protein. Using keratinocytes nuclear extracts for the kinase reaction, we determined that Dlx3 protein is phosphorylated, and the phosphorylation is inhibited by the PKC-specific inhibitor GF109203X, suggesting that Dlx3 is phosphorylated by PKC in vivo. Of the PKC isoforms present in the epidermis, we tested alpha, delta, epsilon and zeta. Dlx3 is primarily phosphorylated by PKCalpha. By deletion and mutational analysis, we showed that the serine residue S138, located in the homeodomain of Dlx3 protein, was specifically phosphorylated by PKC. The phosphorylation of purified Dlx3 proteins by PKC partially inhibited formation of complexes between Dlx3 protein and DNA. These results suggest that Dlx3 protein can be directly phosphorylated by PKC and this affects the DNA binding activity of Dlx3. We have also studied the role of the BMP signaling pathway on the regulation of Dlx3 expression. We analyzed the expression of BMP family members in murine keratinocytes; BMP-2 is expressed in proliferative basal and differentiated suprabasal keratinocytes. BMP-2 induced transcription of Dlx3 within 12 hrs of treatment of keratinocytes cultured in vitro, and the BMP-2 responsive region was delineated to an area between -1917/-1747 in the Dlx3 promoter. Gel shift assays with recombinant Smad1 and Smad4 demonstrated that this DNA fragment (-1917/-1747) was competent in the formation of protein-DNA complexes. By deletion and mutational analyses, we localized a Smad1/Smad4 binding site containing a GCAT motif, which showed similarity to other TGF-beta family responsive elements. Supershift assays with keratinocytes nuclear extract and antibodies against members of the Smad family showed that this motif was able to form a complex with Smad1. Mutation of the Smad1/Smad4 binding site inhibited transcriptional activation of Dlx3 gene by BMP-2. In the hair follicle, where Dlx3 is expressed in the hair matrix cells, and BMP-2 also activated Dlx3 transcription. These results provide a possible mechanism of action for the BMP signaling pathway on the regulation of Dlx3. Identification and characterization of novel epidermal- and differentiation-specific genes were performed in the laboratory. By the Subtractive Suppressive Hybridization (SSH) technique, a novel gene termed Suprabasin, was identified in mouse and human differentiating keratinocytes. A 3' Suprabasin-specific probe hybridized to transcripts of 0.7 and 2.2 Kb pairs on Northern blots with specific detection in differentiated keratinocytes of stratified epithelia. The mouse gene was mapped to chromosome 7 by FISH. This region is syntenic to human chromosome band 19q13.1, which contained the only region in the databases with homology to the mouse Suprabasin sequence. During embryonic mouse development, Suprabasin mRNA was detected at day 15.5, coinciding with epidermal stratification. Suprabasin was detected in the suprabasal layers of the epithelia in the tongue, stomach and epidermis. Differentiation of cultured primary epidermal keratinocytes with 0.12 mM Ca++ or 12-0-tetradecanoylphorbol-13-acetate (TPA) treatment resulted in the induction of Suprabasin. The 2.2 Kb cDNA transcript encodes a protein of 72 kDa with a predicted PI of 6.85. The translated sequence has an amino terminal domain, a central domain composed of repeats rich in glycine and alanine, and a carboxy terminal domain. The alternatively spliced 0.7 Kb transcript encodes a smaller protein that shares the N- and C-terminus regions but lacks the repeat domain region. Cross-linking experiments indicate that Suprabasin is a substrate for TGase2 and TGase3 activity. Altogether, these results indicate that the Suprabasin protein potentially plays a role in the process of epidermal differentiation.